First home Bay Area Duplex with college roommate

[David Mccall]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Alameda.

Purchase price: $625,000
Cash invested: $60,000

Co-owned Duplex in Alameda California.

What made you interested in investing in this type of deal?

It’s 2014, I’m two years out of school, living with my parents working a local job trying to save up . I decided to partner up with my roommate from college to buy our first property to take advantage of recovering market. It was clear that a hockey stick was an effect, we had a sense of urgency to take advantage of an offer as soon as we could afford one.

How did you find this deal and how did you negotiate it?

We partnered up with a couple of agents. Honestly at this time, the bay area was so hot that it was typical to overbid, we offered the maximum amount we were preapproved for.

How did you finance this deal?

10% conventional loan 30 yr fixed with Quickenloans

How did you add value to the deal?

We moved in and began minor rehabbing at first. Then over time added amenities and redid the lower level kitchen.

What was the outcome?

Business partner lives in his half of the duplex. I rent out my half and cash flowing $700/mo. We bought the house for $625,000 and it quickly appreciated 60% to ~$1,000,000 by 2016 and holding as of 2020. We refied in 2016 to knock the PMI off the mortgage and lower our interest rate.

Lessons learned? Challenges?

Sadly, my partner was not interested in pulling money out. Actually because he’s living in one of the units, he LOVES Alameda and he wants to accelerate the payoff. We agreed on that and will be knocking 8 yrs of the 30 yr mortgage by making bi-weekly payments instead of semi-monthly. In other words, normally you have 24 payments in a year, but this agreement will have 26. Those last two payments all go to principal. This saves us about $100k of interest payments.